Revenues and adjusted profits slightly below expectations but management heading in the right direction
G4S, the global security and service group, reported full year results today in which it said that revenues were £7.427m, up 3%, while adjusted profits before interest, tax and amortisation rose by 4% to £496m. Both of these numbers were slightly below market expectations, leaving the shares to open down by roughly 3% in early morning trading. Despite this initial reaction, we believe the results are encouraging and demonstrate the restructuring the group has made over the years following some well publicised fiascos.
Cost efficiencies and productivity gains due to Group restructuring
The reformation has led to cost efficiencies and productivity gains, and there is more to come. It should be appreciated that the Group’s cash flows have improved and that the net debt levels fell to 2.5x EBITDA from 2.8x in 2016. G4S’ underlying markets remain strong, especially in developed markets, but weaker conditions in the Middle East and the disruption caused by the scrapping of high value notes in India disrupted performance in those regions.
We currently recommend G4S as a ‘buy’ for medium risk investors
There is much hope that the highly exposed events of recent years will be a thing of the past and, in a world with increased security needs, it is expected that the group has positioned itself to take advantage of these demands. Indeed, we believe management are taking the group in the right direction which is why we continue to recommend G4S as a ‘buy’ for medium risk investors seeking a balanced return.
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